September is time for investors to make a move

Commentary: Five trends for investors to watch

It’s impossible to have long-term visibility in these troubled times, with the conflict in Syria and the risk of another protracted budget fight in Congress right around the corner.

And most market historians are quick to point to evidence that supports dividend investing for the long term over market timing or swing trading.

But hey, what fun is it to buy and hold?

When you look at the news as of late, it’s clear that the market is at a turning point. The S&P
SPX, +0.27%
is still up big year-to-date and the real estate market has put on quite a show in the last year … but both have started to fade. At the same time, Europe has been dead money since spring 2011 but has finally shown signs of turning around.

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Now may be the time to make a move.

In other words, if you manage your own money then now may be a prime time to make a move.

For the record I am long-term bullish on stocks and the U.S. economy broadly. As such, I see some the current volatility as a great buying opportunity and am currently fully invested as a result.

For those of you more bearish, you may want to see this as an opportunity to place downside bets.

But either way, there are bound to be some fireworks in September. Here’s a bit of what’s in store and why you may want to consider making a move:

Housing Shake-Up: Recent housing data, including a very modest 0.9% increase in June’s seasonally adjusted Case-Shiller price index and new homes sales plunged 13.4%, missing expectations. It’s clear that rising rates have taken a bite out of demand and that momentum is cooling in housing. This could cause serious disruption both to the housing industry as a key employer as well as the “wealth effect” that comes from rising real-estate prices.

Fund Flows: If you need a bearish thesis on stocks, just follow the money. Over $17 billion in capital fled exchange-traded funds in August, the biggest month of outflows in the history of the ETF industry, according to Index Universe. The details are even more disturbing, with a whopping $14 billion pulled out of the flagship SPDR S&P 500 ETF
SPY, +0.27%
the single-biggest proxy for retail investors.

Don’t think it’s just U.S. stocks out of favor though, with over $2.3 billion pulled out of the iShares 3-7 Year Treasury Bond ETF
IEI, -0.11%
almost $1.3 billion out of the iShares Investment Grade Bond Fund
LQD, -0.24%
and over $1.2 billion out of the Vanguard Emerging Markets ETF
VWO, -0.42%
.

Fed Futility: The sad reality is that the Federal Reserve seems to have put investors in a lose-lose situation. As mentioned above, rates are already rising and rattling the market — both in regards to dampening housing as well as pushing money out of funds that dabble in longer-duration bonds. An increase in rates from the Fed would at least validate these moves and at worst accelerate them… but even if the Fed fails to “taper” in September or even defers on rates or bond purchases for another several months, investors are already moving their money accordingly. You can’t put the toothpaste back in the tube on this one even if the Fed stands pat in September.

Casey: Investors care more about Fed than Syria

(3:48)

Financial analysts might bleat about market nervousness over the likelihood of U.S. airstrikes against Syrian President Bashar al-Assad, but the brutal truth is that Wall Street doesn’t care about war. Right now, all it cares about is the Fed. Michael Casey reports.

Consumers Quitting: Also in the column of foregone conclusions is the idea of a consumer pullback. Retail stocks, as represented by the S&P Retail Index ETF
XRT, -0.79%
lost almost 5% in August vs. a roughly 3% pullback for the broader S&P 500 index. And as I noted in my August column about crumbling consumers, another sales decline at Wal-Mart
WMT, -0.66%
and a big miss in July retail sales don’t bode well. If we see bad results next week when August retail sales and consumer sentiment hit, look out below.

History: MarketWatch Trading Deck columnist John Nyaradi said it best Tuesday, “Since 1928, September has recorded more down months than any other month and holds the record for the worst monthly drop in history which came in September 1931, when the Dow lost -30%. Septembers can be an ‘up’ month, but the percentage of positive Septembers is the lowest of any month on the calendar.”

Of course, none of this is to say that September must be a short-term loser or part of a longer bear-market contraction. As I mentioned earlier, there’s plenty of proof that a patient approach will serve you better in the long run.

But if you’re looking for short-term trading fodder, September is sure to be full of potential.

Jeff Reeves is the editor of InvestorPlace.com. Follow him on Twitter @JeffReevesIP

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